LONDON, Nov 16: Oil prices came under further pressure on Friday as world crude producers squared off in a high-risk game of dare which investors fear could escalate into a full-blown price war.

After falling some 15 per cent already this week, London Brent crude for January delivery initially rebounded on Friday morning but was back in n egative territory by late afternoon, down two cents at $17.31 a barrel.

On Thursday the price fell below $17 a barrel for the first time since June 1999.

In New York, December-dated light sweet crude lost early gains to stand at its overnight level of $17.45 a barrel.

Opec’s own basket oil price slumped by nearly $2 to $16.19 on Thursday, the grouping’s secretariat said on Friday.

Oil prices have fallen dramatically as major world crude producers have chosen to chase market share rather than price stability at a time when a supply glut is swamping a market undermined by falling demand.

New York futures have tumbled almost 20 per cent this week as the market quakes at the prospect of oil exporters undercutting each other in what amounts to an oil market turf war.

The 11 oil powers in the Organization of Petroleum Exporting Countries (Opec) threw down the gauntlet to rivals, principally Russia, on Wednesday, warning they would not cut production again unless independent producers followed suit.

But Russia reiterated on Friday that no one could tell it how much oil to export.

“Decisions on oil output and export volumes... are made by the government on the basis of proposals by oil producers and exporters,” said Prime Minister Mikhail Kasyanov.

Analysts say the market fears weeks if not months of tense brinkmanship, with exporters continuing to flood the market with supply despite the slump in demand brought on by the global economic slowdown.

“The prospect is that if non-Opec don’t cut, then Opec won’t cut and then we’re down to $12 a barrel,” said London-based trader Jim Chilcott.

Analysts say Opec’s challenge amounts to a game of dare, the outcome of which will depend on who loses their nerve first.

Budgets in Moscow and Riyadh both depend on crude prices remaining at a certain level, and most analysts believe that Russia can live with lower oil prices longer than Saudi Arabia.

“The oil price would have to fall to very low levels — for example, Urals to $12 a barrel — and stay there for at least six months, for it to critically undermine Russia’s economic and budgetary position,” estimated Roland Nash, an economist with the Moscow-based Renaissance Capital brokerage.

Kuwait has warned that prices could fall as low as $10 a barrel. And the last time they fell that low in 1998, the Russian economy collapsed amid ruble devaluation, debt default and financial humiliation.

“Russia and Opec are involved in a very ugly game of chicken,” he said. “Neither side is willing to budge from its respective position, and the victim is proving to be the oil price.—AFP